As India celebrates its 75th year of independence, it is vital to introspect on each one’s financial health and work on becoming financially independent. The recent uncertainties have shed light on the need to insure oneself.
Financial independence gives one the ability to achieve the financial goals that one sets for themselves and subsequently for their families without undue monetary pressure. At its core is prudent financial planning which helps fulfil goals such as buying a home, a car, going on vacations, children’s education, wedding expenses, and even retirement.
Financial independence and security begin with financial education which covers the basic knowledge of income, taxes, investment etc. Early investing inculcates deep knowledge of various tools one can use. Of all available modes, life insurance is a necessary investment to secure one’s future and the family’s future in case of unforeseen circumstances.
Many individuals purchase insurance plans without adequate research. It is imperative to go for an insurance policy that offers adequate coverage to provide a comfortable financial safety net. Many insurance plans also provide increased returns on maturity thereby helping to create a comfortable corpus at the end of its term.
While the above covers more about the product, it is also imperative that since one becomes a customer with the life insurer for a relatively long period of time, one should be able to experience the freedom or peace of mind throughout the association. This may be ascertained through the claim settlement ratio of the company, Omni-channel servicing capabilities etc.
Here are the best life insurance plans can be considered to secure one’s future:
The simplest type of life insurance is term insurance, or term plan, which is typically what people mean when they hear or say, "life insurance." A term insurance policy offers financial security for a set yearly or monthly fee known as a premium. In the unfortunate event of the policyholder passing away, the life insurer pays the beneficiary a specific sum of money known as the "sum assured" (also predetermined).
ULIPs (Unit Linked Insurance Plans)
A person's financial commitments increase as they advance in life. For e.g., let us consider children’s education.
Given the increased cost of higher education, a family can start saving for this expense even when their children are still very young. ULIPs include both an investment and a protection component. Depending on your risk tolerance, they provide a variety of funds (equity, debt, or hybrid) in which one can invest their money depending on their risk appetites. ULIPs also take into account the fact that the needs change over time and thus provide options such as fund switching and partial withdrawals.
Tax Savings Plan
Equity Linked Savings Schemes (ELSS), online savings plans, and ULIPs all offer prospects for growing wealth through market-linked returns. Under Section 80C of the Indian Tax Act of 1961, these investment programmes can provide significant tax savings advantages. The insurance payouts and the payable premiums are both tax deductible and tax-exempt. Additionally, they give the choice of moving the money invested between high, medium, and low risk.
Prudent financial planning is necessary to live a comfortable life and to ensure that retired life is secure. Apart from building a savings corpus, there are various plans individuals can choose from for building a robust retirement corpus. The earlier one starts investing, the better it is.
Financial independence requires careful planning and the discipline to stick to the plan. This could include making early investment decisions and even letting go of certain expenses when necessary. Hence, this Independence Day, it is vital to be financially independent and secure one’s future.
Nitin Mehta is the Chief Customer Officer of Bharti AXA Life Insurance